4 Small Business Budget Tips for Cash Management
A small business thrives as long as customers purchase their products or services. But to make the business last for years, proper cash management and budgeting are crucial to allocate profits for your small business’ needs successfully. Some businesses don’t hold up because of mishandling funds. When you learn the basics of money management for your business you can prepare a small business budget template. Then, it’ll help you generate enough cash flow to meet your overhead expenses and more to spare for investments to grow your business
For your business to maintain the right balance in handling your finance, here are some basic ways to manage it.
1. Identify Your Income Sources for Your Small Business Budget
When building a small business budget, it’s essential to know the amount of money your business is bringing in every month. Also, it’s crucial to determine where profits are coming from.
Moreover, you’ll be able to see your primary income sources if you’re doing your accounting report regularly. Any additional sources of income should be added to the monthly report. In addition, the types of services you offer will exhibit the number of sources wherein profits can be generated. For example, you may be running a digital freelancing service that offers web content writing, video editing, and graphic design.
Ensure to account for all your cash sources to get the total sum of your monthly profit. If you need assistance, you can check out small business CFO services online. You can also seek the help of a virtual Chief Financial Officer (CFO) who offers forecasting, budgeting, rolling cash planning, and accurate reporting.
2. Track Expenses
To save more, you also need to monitor the business “outgoings”. It’s essential to track how much you spend per day, week and month. Neglecting where your profits go can mean that you’re also piling up on unnecessary bills, which eventually leads to overspending in your small business budget.
If you already have savings, checking or credit card accounts, monitor how much money you’re withdrawing from each account. It helps you to stay on top of your balances. You might be using them to pay for various small expenses, such as staff lunches, new equipment purchases, or other similar expenses that can add up in the long run. If these added expenditures are not declared in your financial reports, you could lose oversight of your cash flow.
Additionally, you should include uncashed checks and make sure that the check receiver can turn it over to the bank for encashment. The last thing you want is an account with overdrawn money, including fees.
Even if you have an accounting staff doing the task for you, it’s still worth it to go over the accounting books yourself. Try integrating reliable accounting software in your business to make recording transactions faster and more efficient. An accurate recording can be used as reference to help you in cross-checking your past and existing expenses.
3. Ask Customers For Deposits
If your business produces goods or is rendering services that require a substantial amount of money and time to finish, then it’s just right to consider asking for a deposit which is also known as milestone payments.
Accepting deposits is a way of generating and managing cash to meet your business needs. Such as acquiring raw materials or paying suppliers within your small business budget plan . Web designers, PR agencies, and construction firms fall under businesses that request deposits from customers.
While not every customer would agree to pay upfront for a down payment, working it out through a compromise might convince them to understand its importance and eventually agree to the terms.
4. Strive To Build Savings
Personal savings almost work the same as savings made from your business. While other enterprises tend to use every cent for scaling, it’ll still help to keep a fraction of your profits aside to secure business savings.
Banks are offering two types of accounts for businesses:
- Business checking account – keeps an unperturbed cash flow cycle safe and secure.
- Business savings account – best for storing funds with a potential to earn interest while maturing.
The best option depends on the scale of your business, your cash reserves, and your business goals. Saving a bit from your income serves as a buffer to unexpected expenses or as seed money for investment opportunities.
Prepare Your Small Business Budget Template
The good news is that you don’t have to start from zero when creating a budget. You may choose from a variety of small business budget templates that have already been created. Budgets may be tricky, so if this is your first time constructing one, you might want to start with a template.
A small business budget template is a useful tool that allows you to keep track of all your financial information in an orderly manner.
Because creating a budget from scratch might be difficult for first-time entrepreneurs, it’s helpful to know that there are a variety of budget templates available. Even if you decide to make your own, you may find it beneficial to refer to templates or sample budgets to stay on track.
What is included in a small business budget template?
- The yearly budget tab examines the amount of money your company earns each year. Input your company’s annual income and costs on this page.
- Your monthly spending are examined under the monthly budget section. You’ll note that you have monthly estimates for each of your yearly totals because you previously filled out the annual budget tab.
- The monthly actuals section is where you can keep track of your real spending and earnings as they arrive each month. This allows you to see how much money your company makes.
- Lastly, the overview tab displays a comparison of your actual and budgeted figures. It provides a summary of your annual and monthly spending plans. This data allows you to evaluate where your company is succeeding and where it needs to improve.
Your small business will experience highs and lows that you must be prepared for. Managing your income can help you in times of urgent needs and prepare you when the right opportunity for expansion comes. The income from your business is what’s sustaining both you and your livelihood, so follow these essential tips mentioned to build a business with a solid foundation.
David is a dynamic, analytical, solutions-focused bilingual Financial Professional, highly regarded for devising and implementing actionable plans resulting in measurable improvements to customer acquisition and retention, revenue generation, forecasting, and new business development.